How to Switch your Health Insurer

With health insurance portability you can shift to a new insurer without losing the benefits of the existing policy. Here’s what you should know

Most people tolerate bad service from their health insurers because they don’t want to lose out on the benefits of the existing policy if they move to another insurer. So far, switching insurers has meant that you are considered a new customer and have to go through the requisite waiting period of one to four years after buying the policy to cover your pre–existing diseases. However, from 1 October, health insurance portability has come into effect, which allows you to switch insurers without losing the benefits of your existing policy. So, if you have an illness that will be covered after three years and have already completed two years with an insurer, you will only have to wait for a year with the new insurer for your illness to be covered.

What is allowed
Portability is applicable only to health insurance policies issued by non–life insurance companies. If you are covered under a group mediclaim, you too can migrate to either an individual health insurance policy or a family floater plan, but only if you have been with the same insurer for at least a year. This feature will be beneficial for employees, who do not have any health plan other than the mediclaim provided by their employer. It will be especially handy when they change jobs.

You can apply for portability only 45 days before renewing your existing policy. You will have to submit a portability form along with the proposal form. Your details will be shared by your existing insurance company and the new one through a portal that the Insurance Regulatory Development Authority (Irda) will be launching soon. Based on this, the new insurer will underwrite its proposal and inform you of its decision within 15 days. If the insurer crosses this deadline, it will have to accept the proposal submitted by you.

However, the new insurer has the right to deny you the plan based on its underwriting policy. For instance, if the maximum entry age for the new insurer’s health policy is 60 years and the policyholder is 65 years old, the application for portability could be rejected. You could also remain stuck with the old insurer if you have had too many claims or are considered to be in the high–risk category, such as a senior citizen. Also, as the new insurer can write the proposal according to its own guidelines, the premium could be very high in some cases.

If you do not receive the proposal from the new insurer till the renewal date of your existing policy, you can extend it by paying the pro rata premium for a short period to your existing policyholder and ensure that your policy is not cancelled.

What to look for
Before opting for porta– bility, you must read the fine print carefully as there may not be a freelook period. “Before switching, you should examine whether the policy coverage offered by the new insurer is at par with the old one. Currently, there is no standardisation of policy wording in the market,” says Subrahmanyam B, VP and head, health vertical, Bharti AXA General Insurance. For example, if you are shifting from an insurer, who is currently offering you a cover of 1 lakh, and the new insurer does not offer a cover below 2 lakh, you could end up paying a higher premium. So, opt for an insurance company that offers a wide range of covers in smaller incremental slabs.

“Customers should evaluate insurance companies and products not just on the basis of cost, but also on features that suit their current and future needs, price rise with age and service standards of the insurance company,” says Gaurav Garg, MD and CEO, Tata AIG General Insurance Company.

If you have accumulated a noclaim bonus, portability may lead to a loss. Though you will be able to carry the no–claim bonus to the new policy, the premium will be calculated on the enhanced cover. Suppose, you are paying a premium of 1,000 for a 1 lakh health plan. You have not made any claim in the past five years and your cover has been enhanced to 1.3 lakh, but you are still paying a premium of 1,000. If you switch insurers, your cover will remain 1.3 lakh, but you will have to pay a higher premium of, say, 1,300.

What’s in store
Insurers believe that portability will improve customer service standards, such as easier buying process, prompt delivery of policy document, and hassle–free claims. “Insurance companies may begin to customise products and, at the same time, some features may become more standardised as customers will display their preferences by switching to insurers that meet their needs,” says Garg. He adds, “There is also the possibility of new entrants, who could aggressively price their products to attract customers away from long–standing health insurance firms.” Says Mukesh Kumar, head, strategic planning, HDFC ERGO General Insurance: “We can also expect an introduction of innovative health plans which help increase the involvement with customers.”

The competition may also resolve the problem of loading (if you make a claim in a year, you are charged a much higher premium the next year). To retain policyholders, insurers may either keep the same premium or increase it marginally.
The benefits are many, but you need to consider the drawbacks before you switch to a new insurer.

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